Product recall costs Cadbury £20m

The salmonella scare that forced Cadbury Schweppes to recall more than 1m of its chocolate bars would cost £20m and is also hitting sales, the group admitted today.

The chief executive, Todd Stitzer, said Cadbury's market share in the UK had fallen 1.1 percentage points over the past four weeks.

The overall market was also hit by the sweltering temperatures and fell 7% in July.

Cadbury lost £5m of sales because of the recall, which cost £7m after insurance. The full-year cost is put at £20m and Mr Stitzer said the impact on trading was still being monitored.

"We have apologised to our consumers, customers and colleagues for any concerns caused and are implementing changes to our UK manufacturing and quality assurance processes so that this cannot happen again," he said.

He stressed that the affected products accounted for less than 3% of UK sales and about half a percent of group sales.

Mr Stitzer said Cadbury, the world's largest confectionery company, would be stepping up its marketing activity significantly in the second half and introducing of a number of new products in the UK. These include a dark chocolate Flake, Cadbury Highlights Chocolate and Cadbury Melts.

News of the cost of the contamination, which Cadbury blamed on a leaking pipe at one of its main factories, came as Cadbury reported a 14% increase in underlying first-half profits, taking them to £402m before tax. Sales for the six months to the end of June rose by 4% to £3.2bn.

The figures were ahead of most analysts' expectations and Mr Stitzer said he expected to deliver full-year sales growth towards the top end of the group's target range.

He said that while there had been a "relatively slow" start to the year, with sales growth of 2% in the first quarter, this had increased to 5.5% in the second quarter.

On the drinks side, sales were 4.3% ahead, driven by strong growth in Dr Pepper and Sunkist.

In confectionery, sales rose by 3.4%. Excluding the impact of the product recall and inventory clearances earlier in the year, the figure was 5%, the group said.

Worldwide, sales of its leading chocolate brand, Cadbury Dairy Milk, grew by 7% over the first half. Gum was the group's fastest growing category with revenues ahead by 11%. Its biggest gum brand, Trident, grew 31%.

Five of the seven products affected by the recall have just returned to the shelves - Dairy Milk Turkish 250g; Dairy Milk Caramel 250g; Dairy Milk Mint 250g; Dairy Milk Eight Chunk; and Dairy Milk 1kg.

Cadbury Dairy Milk Buttons Easter Egg will not reappear until next year, and Cadbury Freddo will not be restocked.